Deputy Commissioner of Income Tax Vs. Ester Industries Ltd. - Court Judgment

Excerpt:
head note: income tax assessment--prima facie adjustment under s. 143(1)(a)--rectification of intimation to disallow claim under section 43b. ratio & held : where interest on money borrowed from financial institutions was paid before filing the return of income and its proof having been produced before assessment, intimation could not be rectified to disallow the claim under section 43b. application : also to current assessment years. a. y. : 1990-91 income tax act 1961 s.43b income tax act 1961 s.143(1)(a) business disallowance under s. 43b--interest paid to financial institutions--cbdt circular nos. 601 and 669 permitting to adduce proof relating to actual payment during the course of assessment proceedings. ratio & held : all the payments in relation to the entire amount in question had been made before filing of the return and that in view of the first proviso to section 43b, the question of disallowance does not arise. even regular assessment proceedings were going on and in view of the cbdt circular no. 669, dated 25-10-1993 it is permissible for the assessed to adduce proof relating to actual payment even during the course of assessment proceedings. thus, one sees nothing wrong in the approach of the commissioner(appeals) in granting relief to the assessed and no interference is called for in the order of the commissioner(appeals). application : also to current assessment years. a. y. : 1990-91 income tax act 1961 s.43b - divorce by mutual consent personal presence of parties exempted power of attorney to dissolve the marriage the special power of attorney in favour of one mr. lal babu tiwari was executed by the petitioner (husband) to appear before the court and testify about the contents of the petition. the petitioner has signed the petition before indian consulate high commission of india in uk under section 3(2) of the diplomatic and consular officers (oaths and fees) act, 1947 under which the documents do not require any further evidence.[para 3] if both the parties, by way of affidavits or through counsel, state that they are married, and are able to produce proof of the marriage and that they have been living separately and have not been able to live together for the prescribed period, then there can be no reason as to why the court should not record its satisfaction as envisaged under section 13-b(2) of hindu marriage act, despite the fact that parties had not appeared in person and pass a decree for divorce.[para 6] where the parties are living far away from the jurisdiction of the court competent to dissolve the marriage, the parties after filing their affidavits can appoint attorneys to act on their behalf. attorney is competent to act on behalf of the principal on the basis of power of attorney executed by the principal. the courts have been allowing attorneys to file the petition, to withdraw the petition, to carry on proceedings in the court on behalf of their principal in all other cases. the attorney can also act in matrimonial cases as per instructions of their principle. the court can take necessary precautions to prevent frauds being perpetuated on it but unless the court smells some kind of fraud being played with it, the court should normally recognize the act of the attorneys. i therefore allow this petition. the order of the trial court insisting on the personal appearance of the parties is set aside.[para 8] - with reference to the bank statements, the said financial institutions had not given a receipt for the payment made to them separately like the receipts issued by other authorities/bodies for the payment towards tax.orderb. s. saluja, j. m. :the department is in appeal against the order of cit(a), dt. 11th feb., 1992, mainly on the ground of deletion of the disallowance amounting to rs. 33,82,334 made by the ao under s. 43b representing unpaid interest to the financial institution.2. the brief facts in this case are that the assessed filed the return on 27th dec., 1990, wherein he claimed deduction at rs. 33,82,334 under s. 43b. the said return was accepted vide intimation dt. 22nd april, 1991. however, the ao issued a notice for rectification dt. 10th oct., 1991, wherein it was proposed to rectify the intimation on the ground that rs. 33,82,334 had been claimed as deduction without attaching any evidence relating thereto. the assessed explained that interest on money borrowed from ifci was paid in sept., 1990, before filing the return. the assessed also relied on the decisions of the honble delhi high court in the case of modi cement ltd. vs. union of india (1991) 100 ctr (del) 48 and srf charitable trust vs. union of india & ors. (1991) 100 ctr (del) 160. the assessee, thereforee, requested the ao not to make any rectification order under s. 154. however, the ao did not accept the plea of the assessed and made the rectification order under s. 154.2.1 on first appeal the learned counsel for the assessed referred to the cbdt circular no. 601, dt. 4th june, 1991, in which instruction on the first proviso to s. 43b have been issued. it was mentioned that as far as evidence of payments under cl (a) is concerned, there should normally be no difficulty as the assessed can enclose the challan, etc., evidencing the payment. it was further mentioned that in case that was not possible, then the assessed must submit along with the return of income, a certificate from on accountant, as defined in the expln. to s. 288 of the act wherein the accountant has to verify that the payment mentioned in cl. (a) and claimed as a deduction, had been made by the due date for the filing of return under sub-s. (1) of s. 139 of the act. it is further mentioned that in the case of evidence payment under cl. (c), the evidence required will be a certificate from an accountant as defined in s. 288. it is further mentioned that in the case of payments under cl. (d), the evidence required will be either a certificate from the institution concerned, or a certificate from an accountant as defined in s. 288. the learned cit(a) observed that the impugned disallowance fell under cl. (d) of s. 43b and that a certificate from the institution concerned or a certificate from the accountant use required. the cit(a) further observed that the assessed had relied on 2 judgments (referred to above) of the honble delhi high court. she, thereforee, observed that the ao was obliged to draw the attention of the assessed to the fact that a certificate from an accountant in this regard would be a sufficient condition for agreeing with the contention of the assessee. she also observed that the impugned order was made in the year 1991 and the circular clarifying the position as to the nature of evidence required for obtaining the benefit of deduction under s. 43b was dt. 4th june, 1991. she also observed that the ao could have referred to the said circular before passing order under s. 154. in the circumstances she accepted the plea of the assessee. the department is aggrieved.3. the learned departmental representative shri vimal shah, relied heavily on the orders of the ao and his further submissions were reiteration of the arguments taken by the ao. he further submitted that the assessed did not produce certificate of the chartered accountant and that no certificate of the financial institution concerned was filed. in this connection he referred to p. 13 of the paper-book where copy of cbdt circular no. 601, dt. 4th june, 1991, is placed.3.1 the learned counsel for the assessed submitted that the requisite evidence was produced during the course of regular assessment which had commenced in the meanwhile. in this connection he invited our attention to para 5 of the submissions made by the assessed before the dy. cit on 23rd oct., 1991 (pp. 3 to 6 of the paper-book). in the said paragraph, it is mentioned that the payment of interest of rs. 33,82,334 was made by different cheques to ifci, idbi and icici. it is further mentioned that all the payments in relation to the entire amount in question had been made before filing of the return and that in view of the first proviso to s. 43b, the question of disallowance does not arise. it is also mentioned in para 6 that regular assessment under s. 143(3) is going on for the same assessment year and the ao may satisfy fully and completely in regard to the factum of payment of the aforesaid amount to the financial institutions concerned. with reference to the bank statements, the said financial institutions had not given a receipt for the payment made to them separately like the receipts issued by other authorities/bodies for the payment towards tax. in view of the foregoing he submitted that no interference is called for in the order of the learned cit(a).4. we have carefully considered the rival submissions on this issue and have also perused the orders of the tax authorities and other relevant record to which our attention was invited during the course of hearing. it is observed that in this case even regular assessment proceedings were going on and in view of the cbdt circular no. 669, [dated 25th oct., 1993] it is permissible for the assessed to adduce proof relating to actual payment even during the course of assessment proceedings. thus, we see nothing wrong in the approach of the learned cit(a) in granting relief to the assessed and we see no reason to interfere with her orders.5. in the result, the appeal of the department is dismissed.

Judgment:
ORDER

B. S. SALUJA, J. M. :

The Department is in appeal against the order of CIT(A), dt. 11th Feb., 1992, mainly on the ground of deletion of the disallowance amounting to Rs. 33,82,334 made by the AO under s. 43B representing unpaid interest to the financial institution.

2. The brief facts in this case are that the assessed filed the return on 27th Dec., 1990, wherein he claimed deduction at Rs. 33,82,334 under s. 43B. The said return was accepted vide intimation dt. 22nd April, 1991. However, the AO issued a notice for rectification dt. 10th Oct., 1991, wherein it was proposed to rectify the intimation on the ground that Rs. 33,82,334 had been claimed as deduction without attaching any evidence relating thereto. The assessed explained that interest on money borrowed from IFCI was paid in Sept., 1990, before filing the return. The assessed also relied on the decisions of the Honble Delhi High Court in the case of Modi Cement Ltd. vs. Union of India (1991) 100 CTR (Del) 48 and SRF Charitable Trust vs. Union of India & Ors. (1991) 100 CTR (Del) 160. The assessee, thereforee, requested the AO not to make any rectification order under s. 154. However, the AO did not accept the plea of the assessed and made the rectification order under s. 154.

2.1 On first appeal the learned counsel for the assessed referred to the CBDT Circular No. 601, dt. 4th June, 1991, in which instruction on the first proviso to s. 43B have been issued. It was mentioned that as far as evidence of payments under cl (a) is concerned, there should normally be no difficulty as the assessed can enclose the challan, etc., evidencing the payment. It was further mentioned that in case that was not possible, then the assessed must submit along with the return of income, a certificate from on accountant, as defined in the Expln. to s. 288 of the Act wherein the accountant has to verify that the payment mentioned in cl. (a) and claimed as a deduction, had been made by the due date for the filing of return under sub-s. (1) of s. 139 of the Act. It is further mentioned that in the case of evidence payment under cl. (c), the evidence required will be a certificate from an accountant as defined in s. 288. It is further mentioned that in the case of payments under cl. (d), the evidence required will be either a certificate from the institution concerned, or a certificate from an accountant as defined in s. 288. The learned CIT(A) observed that the impugned disallowance fell under cl. (d) of s. 43B and that a certificate from the institution concerned or a certificate from the accountant use required. The CIT(A) further observed that the assessed had relied on 2 judgments (referred to above) of the Honble Delhi High Court. She, thereforee, observed that the AO was obliged to draw the attention of the assessed to the fact that a certificate from an accountant in this regard would be a sufficient condition for agreeing with the contention of the assessee. She also observed that the impugned order was made in the year 1991 and the circular clarifying the position as to the nature of evidence required for obtaining the benefit of deduction under s. 43B was dt. 4th June, 1991. She also observed that the AO could have referred to the said circular before passing order under s. 154. In the circumstances she accepted the plea of the assessee. The Department is aggrieved.

3. The learned Departmental Representative Shri Vimal Shah, relied heavily on the orders of the AO and his further submissions were reiteration of the arguments taken by the AO. He further submitted that the assessed did not produce certificate of the chartered accountant and that no certificate of the financial institution concerned was filed. In this connection he referred to p. 13 of the paper-book where copy of CBDT Circular No. 601, dt. 4th June, 1991, is placed.

3.1 The learned counsel for the assessed submitted that the requisite evidence was produced during the course of regular assessment which had commenced in the meanwhile. In this connection he invited our attention to para 5 of the submissions made by the assessed before the Dy. CIT on 23rd Oct., 1991 (pp. 3 to 6 of the paper-book). In the said paragraph, it is mentioned that the payment of interest of Rs. 33,82,334 was made by different cheques to IFCI, IDBI and ICICI. It is further mentioned that all the payments in relation to the entire amount in question had been made before filing of the return and that in view of the first proviso to s. 43B, the question of disallowance does not arise. It is also mentioned in para 6 that regular assessment under s. 143(3) is going on for the same assessment year and the AO may satisfy fully and completely in regard to the factum of payment of the aforesaid amount to the financial institutions concerned. With reference to the bank statements, the said financial institutions had not given a receipt for the payment made to them separately like the receipts issued by other authorities/bodies for the payment towards tax. In view of the foregoing he submitted that no interference is called for in the order of the learned CIT(A).

4. We have carefully considered the rival submissions on this issue and have also perused the orders of the tax authorities and other relevant record to which our attention was invited during the course of hearing. It is observed that in this case even regular assessment proceedings were going on and in view of the CBDT Circular No. 669, [dated 25th Oct., 1993] it is permissible for the assessed to adduce proof relating to actual payment even during the course of assessment proceedings. Thus, we see nothing wrong in the approach of the learned CIT(A) in granting relief to the assessed and we see no reason to interfere with her orders.

5. In the result, the appeal of the Department is dismissed.